It has been about a month since the last earnings report for Pure Storage (PSTG Quick QuotePSTG - Free Report) . Shares have added about 18.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Pure Storage due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Pure Storage Q4 Earnings & Revenues Beat Estimates

Pure Storage reported non-GAAP earnings of 36 cents per share in fourth-quarter fiscal 2022, which beat the Zacks Consensus Estimate by 33.3%. In the prior-year quarter, the company reported earnings of 13 cents per share.

Total revenues increased 41% from the year-ago quarter’s level to $708.6 million. Moreover, the top line surpassed the Zacks Consensus Estimate by 12.3%.

The upside can be attributed to subscription services growth as well as revenue growth in both domestic and international segments.

In fiscal 2022, the company reported revenues of $2.18 billion, up 29% year over year. Subscription services revenues rose 37% year over to $738.5 million.

Quarter Details

Product revenues (contributed 69.5% to total revenues) amounted to $493 million, up 40.5% on a year-over-year basis.

Subscription services revenues (30.5%) of $216 million surged 42% on a year-over-year basis. The upside can be attributed to ongoing support contracts and robust adoption of Evergreen subscription services and Pure as-a-Service subscription, including Cloud Block Store.

Subscription Annual Recurring Revenue (ARR) amounted to $848.8 million, up 31% on a year-over-year basis. Subscription ARR includes the annualized value of all active subscription contracts as of the last day of the quarter plus annualized on-demand revenues, added Pure Storage.

Management reported that total revenues in the United States were up 51% and the same for International increased 20% year over year.

Pure Storage is also gaining from the growing clout of its latest second-generation FlashArray//C, a cost-effective storage array solution. This provides customers with higher performance capabilities and enables them to run complex cloud workloads on a single platform.

Solid pipeline and synergies from the Portworx acquisition, which strengthened capabilities for containerized and cloud-native applications, favored performance.

Pure Storage added 470 new customers in the reported quarter. The company’s customer count now stands at 10,0000, including 50% of the Fortune 500 companies, noted Pure Storage.

Margin Highlights

Non-GAAP gross margin contracted 60 basis points (bps) from the year-ago quarter’s level to 68.8%.

Non-GAAP Product gross margin contracted 210 bps from the year-ago quarter’s level to 67%. Product gross margin was affected by increasing supply chain costs in the quarter under review. Non-GAAP Subscription gross margin came in at 73%, which expanded 280 bps on a year-over-year basis.

Non-GAAP operating expenses, as a percentage of total revenues, came in at 52% compared with 62.1% reported in the prior-year quarter.

Pure Storage reported a non-GAAP operating income of $119 million in the fiscal fourth quarter compared with the non-GAAP income of 37 million reported in the year-ago quarter. Non-GAAP operating margin stood at 16.8% compared with 7.3% reported in the prior-year quarter.

Balance Sheet & Cash Flow

Pure Storage exited the quarter ended Feb 6, 2022, with cash, cash equivalents and investments of $1.41 billion compared with $1.4 billion as of Oct 31, 2021. As of Oct 31, long-term debt stood at $786.8 million compared with long-term debt of $778 million as of Oct 31, 2021

Cash flow from operations amounted to $138 million compared with $127 million in the prior quarter. Free cash flow was $117 million compared with $101.3 million in the previous quarter.

For fiscal 2022, cash flow from operations was $410 million compared with $188 million in the prior year. Free cash flow was $308 million compared with free cash flow of $93 million in the previous year.

During the fiscal fourth quarter, the company returned $69 million to shareholders via share repurchases of more than 2.4 million shares and completed its $200-million share repurchase authorization. The company also announced a new $250-million share repurchases plan.

Deferred revenues increased 28% to $1.08 billion in the quarter under review.

The remaining performance obligations (RPO) at the end of the fiscal fourth quarter totaled $1.4 billion, up 29% on a year-over-year basis. The metric represents total committed non-cancelable future revenues.

Guidance

Pure Storage expects first-quarter fiscal 2023 revenues to be $520 million, indicating year-over-year growth of 26%.

Non-GAAP operating income for the fiscal first quarter is expected to be $16 million. Non-GAAP operating margin is expected to be 3%.

For fiscal 2023, Pure Storage expects revenues to be $2.6 billion, indicating year-over-year growth of 19-20%.

Non-GAAP operating income is expected to be $300 million and non-GAAP operating margin is expected to be 11.5%. 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

The consensus estimate has shifted -11.71% due to these changes.

VGM Scores

At this time, Pure Storage has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, Pure Storage has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.